Japan August machinery orders seen up for second straight month

Reuters Staff

3 Min Read

TOKYO (Reuters) - Japan’s core machinery orders were seen rising moderately in August after showing robust growth in July, a Reuters poll showed on Friday, suggesting capital investment may be on a firmer footing.

FILE PHOTO: People work next to heavy machineries at a construction site in Tokyo, Japan, March 13, 2016. REUTERS/Yuya Shino

Core machinery orders, a highly volatile data series regarded as a leading indicator of capital spending, likely rose 1.1 percent in August from the previous month, a Reuters poll of 16 economists found.

Machinery orders jumped 8.0 percent in July, the fastest gain since January 2016.

Core orders, which exclude those of ships and electric power utilities, were seen rising 0.8 percent in August from a year ago after posting an annual 7.5 percent fall in July.

Analysts say the need to invest in labor-saving equipment and renew aging facilities, as well as construction demand for the 2020 Tokyo Olympic Games, are supporting corporate capital investment.

Positive though these developments may be, some analysts say capital investment does not yet have the power to boost the broader economy.

“Firms’ capital spending is on a rising trend but it is not yet showing signs it could accelerate its sustainable growth and it has not gained enough momentum to lead the economy,” Koya Miyamae, senior economist at SMBC Nikko Securities, said in the survey.

The Cabinet Office will publish the machinery orders at 8:50 a.m. Japan time on Wednesday (2350 GMT Tuesday).

The finance ministry will issue the August current account balance on Tuesday, which is seen likely to show a 2.26 trillion yen ($20 billion) surplus, the poll found.

It would be the 38th straight monthly current account surplus, thanks to a strong trade balance from upbeat exports and the weak yen which also boosts income from overseas investments.

The poll found the Bank of Japan’s corporate goods price index (CGPI) was expected to rise 3.0 percent in September from a year earlier, led by rising prices for oil products.

CGPI, which measures the prices companies charge each other for goods and services, was seen up 0.2 percent in September from August.